Checklist: financial governance for efficiency in the NHS


At the start of what could prove to be the most financially pressured year in the history of the NHS, it helps to set out what questions boards and governing bodies should be asking in order to gain the right assurance that their organisation is doing all it can to maximise value for money – and, by implication, what questions Chief Financial Officer's (CFOs) should be ready to answer. There are many reference points, including the Five Year Forward View, the Carter Report on Operational Productivity and Performance in NHS Acute Hospitals and Monitor’s Closing the NHS Funding Gap: How to Get Better Value Health Care for Patients. Here, then, are ten questions those in governance might ask to get to the heart of the matter and constructively challenge whether efficiency is being maximised.

1. How does the board ensure value is achieved in decision making?

Current performance is largely a function of past decisions. Unpicking past mistakes is complicated, but every organisation should be able to make sure that the right investment and disinvestment decisions are being made going forward. Given restricted resources, that means prioritisation. The Future Focused Finance initiative has developed a framework specifically designed to make sure the Best Possible Value decisions are made in the NHS. 

What information does the board use in making decisions? How is value measured and compared? Does your organisation look at value as part of decision making? If not, why not?

2. Is service integration being used positively?

The government’s agenda is clear enough: plans are to be made by 2017 to integrate health and social care by 2020. But there are two ways of doing this: by going through the motions without challenging the way things are done, or by using integration as a positive opportunity to remodel care pathways, bring teams together, and make financial decisions in the interest of the whole population. Too often, the benefits of individual organisations override the best solutions for the service as a whole and the institutional nature of boards makes it difficult to challenge the status quo. 

Is integration being pursued in the right spirit? What difference will it really make to the delivery of efficient, high-quality services? Are discussions moving beyond governance and structures into real service change?

3. Is there enough investment in transforming services and preventive measures for the long term?

Tough as it is in the current climate, it is vital to invest in the transformative and preventative measures that provide the only means to prevent a cycle of recurrence of short-term crises. Given the current financial pressures across health and social care, and relentless demographic pressures, it is often difficult to devote time and resource to anything other than this year’s issues. 

What horizon is the board using for its decision making? Are transformational change and prevention an explicit part of forward planning? Are initiatives pitched at a level sufficient to make a difference? Does the board have an agreed approach to evaluating early intervention with partners?

4. Is long-term care being delivered in the right settings?

Health and care systems are implored to work together to deliver services that are effective for patients; the benefits of joint working can be seen most prominently in patients needing long-term care, a group that is driving the highest levels of activity. Moreover, they have radical potential to be delivered at lower cost with better outcomes. 

Does the local health system have a programme in place to make sure that community care is the default setting in such cases? How is our organisation supporting this work? Is our contribution making a difference?

5. Is learning from initiatives such as the New Models of Care being used to update our strategic planning?

The Five Year Forward View puts considerable faith in the piloting of, drawing conclusions from and rolling out of innovative care models. This programme is unlikely to deliver savings in the short term, which goes some way towards explaining the need to frontload the £10bn of government support that underpins the ambition to make £22bn of efficiency gains by 2020. Nonetheless, health systems should be putting processes in place now to ensure speedy transfer of the learning from the pilots and vanguards that quantifies and feeds effectively into its future planning, such as sustainability and transformation Plans (STP). 

Is the board up to speed with relevant findings coming from the vanguard sites? Is there a plan in place to translate the learning into practice? How will findings be incorporated into the local STP?

6. Is the use of every £ being examined?

With recent priorities being focussed more intensely on the achievement of ideal patient staffing ratios and avoiding regulator criticism, CFOs in health have often found that they have been a lone voice in promoting the need for serious cost constraint. The planning guidance for 2016/17 emphasises the need for cost control to be forensic, citing this as the key means of returning to financial balance. Boards and supporting committees have an important role to play in ensuring that all senior managers understand the need to control costs in addition to delivering safe, high-quality care.

Does the board ask for information on how forensic cost control is being implemented? Do all board members understand the financial position fully, and their own role in achievement of the financial targets? Culturally, do senior executives and non-executives set the right tone? What do your external auditors say about your culture? Are CIPs agreed well in advance of the financial year, and are delivery profiles set and met? Does the CFO accurately RAG-rate delivery, and does the board intervene as appropriate? 

7. Are staffing resources being optimised?

As 70% of NHS expenditure is on staff, the biggest capacity for improvement is likely to be by making best use of that resource. Improvement in staff productivity is highlighted as one of the key methods for generating efficiency savings, but to what extent has this been looked at in detail in the organisation? For example, the staff shortages in the £10bn/year workforce of 150,000 doctors can quickly lead to reductions in service provision and quality. In this context, it is imperative that their precious time is used to maximum benefit, with a constant challenge as to whether they are performing tasks that could be performed by less expensive staff. 

The Carter Report highlights variation in staff productivity and finds that it leads to delivery problems, such as cancelled operations or unavailable theatres, so reducing the proportion of the available and paid-for capacity being used. Even more is invested in the 380,000 qualified nurses employed at a cost of £19bn (including agency spend), but it is very hard in practice to align capacity and demand. Carter found that wards often have more nurses than guidance requires, or else fewer. Predicting levels of need and fitting the roster to those is critical, but not easy. 

Do you have the data to identify any unwarranted variation in staff cost, usage and productivity? Is skill mix reviewed forensically, or are there areas of work that could be undertaken more effectively by IT systems or administrators? Does the organisation have an effective, electronic nurse rostering system, and are the reports generated being used regularly to ensure rotas are flexed to fit with patient acuity? Does the board test this on walkabouts?

8. Has all the low-lying procurement fruit been plucked?

The most recent Carter Report suggests that £0.7bn could be saved nationally through improvements in procurement. Some of those savings require national initiatives or extensive regional collaborative action. Those are important matters, but a simple immediate check is whether the lower lying local fruit has all been plucked. The use of good-quality comparative data is key to evening up negotiations between suppliers and individual organisations. 

How much information does the board receive on procurement savings targets and initiatives? Is a plan in place to implement the local elements of Carter’s recommendations on procurement? How far ahead is the organisation in the implementation of eProcurement, which will enable effective national comparisons and improve negotiations? Is best use being made of collaborative procurement arrangements and national catalogues?

9. Could the organisation’s estate be better used and managed?

The sheer size and complexity of the NHS estate means its value for money must be seriously considered. Yet the perception that the position is fixed, together with charges being hidden within the technical ‘below the line’ areas of the trust’s finance reports, mean that the estate doesn’t always receive sufficient review and discussion. Carter highlights significant variation in the estates and facilities running costs between organisations, with savings of up to £1bn per annum available if the highest spenders were to achieve the median spend levels. 

The extent of unused, under-used and non-clinical space within a health facility should also be of concern, as this expensive resource is not being fully utilised for the treatment of patients. Put this alongside the propensity to hold onto assets due to risk aversion and the protracted timescales of property sales, and review of property management and usage represents a significant financial and operational opportunity. 

Is there an estates strategy in place that is regularly reviewed? What proportion of buildings are used for clinical services and what is the occupancy level? How do we compare on facilities and estates costs?

10. Has managerial capacity been taken into account?

As will be clear even from the nine questions above, it’s all too easy to suffer initiative overload such that nothing gets seen through sufficiently. The co-ordination difficulties posed by the internal fragmentation of the NHS, the pressure to collaborate ever-more fully with partners, and the impact of previous cost reductions exercises are all likely to exacerbate any shortfall in change management capacity. 

Better, then, to base plans on a sober assessment of the capacity to see them through, and get a few big things done, than to attempt too much and fail. The need to minimise management costs, highlighted again recently in the 7% ceiling recommended by the Carter Report, means that boards have to be clear about prioritising scarce management resources rather than increasing costs.

Has the board made an honest assessment of the change management capacity available and built that into its change programme planning? Is there a willingness to take the tough decisions about prioritisation and stopping some activities?

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